Is the Debt Arrangement Scheme still relevant?

It could be argued that the Scottish Government’s Debt Arrangement Scheme (DAS) has had its day.

Introduced in 2004, it has gone through many updates and changes over the years. With the introduction of a dedicated Business DAS in 2015, partnerships, trusts or an unincorporated body of persons can now also benefit from repaying debts over a number of years, the freezing of interest and charges and protection of assets.

However, even with those excellent features, the use of DAS as a problem debt management tool has dropped since it’s height in 2012/13.

We keep hearing in the news that there is a ‘Growing personal debt mountain!’, ‘The next crash is just around the corner!’ or about ‘Britain’s growing debt problem!’. If that’s the case what then are people doing to deal with their problem debt?

Some may use a formal insolvency option such as Sequestration (Bankruptcy) or a Trust Deed. If they have no assets this may be the best solution for them.

However If they have equity in property, or want to protect their assets, they may consolidate debts into their mortgage; with such current low interest rates this makes some sense. But, long term it’s really just accumulating more debt and if mortgage rates go up again, how long will it be before people find they are having difficulty trying to find that extra amount each month to cover the additional costs?

It’s been suggested that PPI claims may be a factor and people are using the money they get from these to clear or pay towards debts.

Another factor could be the use of Debt Management Plans (DMPs). These work in a similar way to a DAS, allowing people to repay debts over a number of years and freezing interest and charges with the creditors’ agreement. The criteria to enter one is less stringent than a DAS, however they don’t offer that guaranteed level of protection which comes with the Scottish Government backed Debt Arrangement Scheme. Creditors agreeing to a DMP can still take further action if they wish to do so or refuse to freeze interest and charges.

As the DAS is not yet available in England, DMP’s are still widely in use there.

So overall, is DAS less relevant today than it was a few years ago? In short I believe the answer is ‘No’. If anything, it’s more relevant.

As a tool for helping people and businesses repay problem debt, it’s not perfect, but the benefits would seem to far out way the detriments.

From the moment proposals are sent to creditors, interest, charges and fees are frozen and assets are protected. As long as debtors stick to the monthly payments creditors can’t take further action against them. If your circumstance s change and you can no longer meet your payments, the DAS can be varied or a payment break lasting up to six months applied for. If creditors object to the initial proposal the decision on whether or not to allow the DAS or BDAS to proceed is taken by the Accountant in Bankruptcy under the fair and reasonable test. Furthermore, it’s all backed in statute by the Scottish Government so creditors can’t suddenly change their minds and it’s not classed as formal insolvency but a voluntary arrangement with your creditors.

So, if you are having issues with problem debt, don’t bury your head in the sand or hope that it will go away. Seek some advice. Either contact mlm solutions, for a free debt options review, where a continuing money adviser will be able to advise you on the most suitable course of action for your circumstances or, speak to your local Citizens Advice Bureau, Step Change or other free sector debt advice organisation.